Thirty-five year-old Huang Kun had prepared a report alleging
that Silvercorp, whose headquarters is in Vancouver but whose
main operation is in central-west China, had overstated its
production and the amount of precious metals contained in its
mines.

When the report was released, the stock's price on the Toronto
Stock Exchange tanked 20 percent. Huang
worked for a company that shorted the stock.

Huang was picked up at Beijing's airport trying to leave for Hong
Kong. MacKinnon and Hoffman write that he was strip-searched
and placed in a cell in the Beijing First Detention Centre with
12 other inmates.

[Huang] has been prevented from leaving China for more than eight
months, and was made to pay $32,000 in a form of unofficial bail,
before being re-arrested in July.

Mr. Huang’s lawyer, Wang Yuehong, believes he will be charged any
day now with 'disseminating false facts to impair another
person’s commercial reputation,' a criminal offence that carries
a maximum punishment of two years in prison. If charged, Mr.
Huang’s chances of winning his argument in court are exceedingly
small: conviction rates in China are above 98 per cent.

The arrest is part of a new government campaign to crack down on
speculators betting that certain Chinese companies will fail,
MacKinnon and Hoffman write.

Chinese authorities are understood to be deeply concerned about
the reputational damage caused by the wave of corporate scandals.
And they want the bad press to stop.

"The attacks by shorters and the issues related to a number of
U.S.-listed Chinese companies have caught the attention of
officials at the Ministry of Commerce and the National
Development and Reform Commission,” said a Canadian
lawyer with high-profile Chinese corporate clients who is well
connected in Beijing and spoke on the condition of
anonymity.

"They don’t think it is necessarily a single isolated action. So
things like this have started to climb to the top of attention
among senior officials."